We seem to be getting a lot of calls to put together a SPIF program for channels because “we have to motivate them to start selling now!” Such a request is often reactionary, and ill conceived for what has to be done “now”. Before I go on much further, let me first establish the appropriate context for this entry:
The word “SPIF” is an acronym for “Sale Promotion Incentive Fund” which is often seen with 2 “f’s” (which it doesn’t have), albeit that spelling seems to be somewhat acceptable to me when authors turn it into a “word” vs an acronym (as in “spiff”). In any case, we will use this reference as a sales incentive program targeting individual sales representatives (vs. rewarding Partner Companies as a whole). Literally, a “SPIF” program might be offered to your own sales force, or Sales Reps employed by your channel partners or resellers. For the purpose of this audience, my comments will be directed to those planning on offing such a program to their reseller sales reps.
With that context behind us, the following considerations seem to come up with every discussion surrounding the subject with clients inquiring about putting such an incentive program together. SPIF programs can be especially effective for influencing behavior because they directly target the sales rep: “where the rubber meets the road”, as they say.
Tactical vs. Strategic: Tactical SPIF programs are designed to address a short term need (such as depleting stock of an end of life product). Strategic Programs are characterized by longer timeframes and are designed to build “relationships” with participants as much as motivate specific behavior. These are often referred to as Loyalty Programs. The challenge with the shorter-term tactical programs is the investment required to launch one in both cost and time. In addition to creating the infrastructure, there are costs around deploying and communicating the program in an effort to secure participation from all the right parties before the program period is over. What’s interesting to me is how manufacturers underestimate what is required to get mindshare from potential participants, and then once they do, the program expires. So, despite the investment in time and money, manufacturers have to start the process all over again the following year when a similar need arises. More often than not, these hastily designed programs rarely achieve the levels of participation and sales that manufactures hoped. Strategic Programs, on the other hand, create a foundation and a relationship for varying “rewardable” activities over time, and you only need to create the infrastructure and seek buy-in once. Generally, you’ll get a better bang for your buck over time.
Partner Acceptance of SPIF Programs in general: One of the things we have discovered is that a growing number of leading partner companies do not want their vendors influencing sales through SPIF programs. Rather, these partners prefer that all rewards go to the company for redistribution as they see fit.More often than not, the resellers who are against these programs represent the 20% of your partner base that makes up 80% of your sales. Not getting their buy-in can hamper the success of your program. Interestingly, acceptance of such programs targeting reseller sales reps can be higher if it is structured as a strategic program that addresses mutual needs of both the manufacture and reseller, and includes rewards for “Soft” activities (such as training) as well as “hard” sales. This rejection of tactical SPIF program by leading partners is often a surprise by manufactures after the fact. Don’t let that happen to you.
Get your Ts and Cs in order: Terms and conditions are a key requirement for the program before you launch it. Effectively designed Ts and Cs can protect you and your partners from embarrassment–and possibly litigation–in the future. Be sure that all participants agree to the program Ts & Cs as a condition of participation. Regardless of who authors them, it is the sponsor’s responsibility to make sure they are legal and binding within the jurisdictions offered, so be sure your legal team approves all Terms and Conditions for each country that you offer such a program. Note that as much as we take these programs for granted in North America, SPIF programs are flat out NOT LEGAL in many countries in EMEA and APAC as it implies formal employment between the resellers’ reps and sponsoring manufacturer—so don’t take this step lightly. Note that within the US, W-9s will have to be completed and 1099’s will have to be issued to all participants earning in excess of $600.
Consider pre-registration: One benefit to pre-registration is that it can provide an early metric for program acceptance before any sales are made. This will help you determine whether you need to step-up communication efforts in order to get the level of participation you expect throughout the program period. And for program participants, pre-registration can all simplify the process when subsequent sales are made, as much of the personal information has already been pre-registered.
There are many other considerations, too. But those will be topics of future entries. Perhaps you have some hard earned lessons of your own that you’d like to share…